Royal Bank of Canada has been ordered to divulge the real owners of 97 offshore corporations that used its services, but a critic is wondering why it’s taken the Canada Revenue Agency six years to acquire a fount of information that could help detect tax cheats.
In submissions to the Federal Court of Canada, the CRA says most of the companies used tactics to “obfuscate the identities of the persons who truly control and beneficially own these entities,” and it wants to check whether the real owners are Canadians hiding money in tax havens.
“The CRA is concerned that any or all of these 97 Bahamian corporations may be controlled and/or beneficially owned by persons resident in Canada,” the agency says in a court filing.
Canadian individuals and corporations have $23 billion in declared, known funds held in or invested through the Bahamas — more than France, Spain and Portugal combined. A 2018 CRA study suggested Canadians have another $76 billion to $241 billion in undeclared, hidden wealth stashed in all offshore jurisdictions combined, but it didn’t break it down by country.
In May, a judge granted the federal government’s request for an order for Royal Bank and its RBC Dominion Securities subsidiary to provide any information that would help the CRA identify the owners of the 97 Bahamas corporations. The bank did not oppose the government.
The CRA says in its court filings that all the companies had investment accounts at Royal Bank or RBC Dominion at some point, “which suggests that they might be or have been controlled by persons resident in or situated in Canada.”
It’s not inherently illegal for Canadians to have an offshore account or company, but any assets over $100,000 and any income have to be reported for tax purposes.
CRA mum about other banks
CBC/Radio-Canada originally reported in 2016 that the Bahamas Leaks revealed that three Canadian banks had provided services to nearly 2,000 offshore companies in the Bahamas since 1990. The banks were what’s known as “registered agents” — licensed intermediaries who pay the annual fees to the Bahamas corporate registry, manage the paperwork and in many cases also incorporate the offshore companies.
The leaked files showed that Royal Bank acted as agent for 847 Bahamian companies listed in the leaked data, companies with names from Abbatis 1 Inc. to Yellow Jacket Holdings Ltd., while CIBC registered or administered 632 and Scotiabank handled 481.
Royal Bank didn’t answer questions from CBC News about the Bahamas corporations, but did provide a statement saying that in general, it has “high standards and an extensive due diligence process to detect and prevent any illegal activity occurring through RBC.”
Neither the CRA nor RBC would explain how the number of offshore companies of interest was whittled down to 97 from the 847 number. Some of that reduction is likely because even back in 2016, nearly half of those companies were already dormant or dissolved. It’s possible the CRA also determined that many of the companies had no Canadian shareholders or other ties to Canada that could lead to tax obligations.
Toby Sanger of Canadians for Tax Fairness says the Bahamas is a notoriously secretive jurisdiction where people often route money in order to keep hidden. (CBC)
There is no indication in the docket of the Federal Court that the CRA has also gone after any of the companies managed by CIBC or Scotiabank. It’s possible the tax agency obtained information directly and confidentially from those two banks using powers under the Income Tax Actthat don’t require it to first get a court order, but it wouldn’t say.
“The CRA does not generally release information related to our compliance approaches, as it could provide a roadmap to non-compliance,” the agency said in a statement to CBC News. “As such, we are unable to confirm if the CRA will be seeking authorization to retrieve third party data from CIBC and Scotiabank.”
‘Very frustrating’
Toby Sanger, a senior policy adviser to the advocacy group Canadians for Tax Fairness, said the lack of transparency doesn’t help the impression that the CRA “seems to be more focused on going after the easy targets, the small-time individuals,” rather than the bigger and more complex cases of offshore tax evasion and avoidance.
“We shouldn’t just kind of write these carte blanche cheques allowing wealthy corporations and individuals with money in whatever jurisdiction they decide to park it in to avoid taxes,” he said in an interview.
The CRA, which proclaimed in the wake of other leaks, such as the Panama Papers and the Paradise Papers, that it was cracking down on offshore tax shenanigans, also wouldn’t explain why it’s only seeking ownership records for the 97 offshore companies now — six years after the Bahamas Leaks brought them to light.
“It’s very frustrating and disappointing that it has taken the CRA so long to act on these leaks,” Sanger said. “The slow action in this instance on the Bahamas Leaks means that they’re just kind of crying wolf, and that it’s more bark than bite.”
The Bahamas Leaks records were obtained by Sueddeutsche Zeitung, the same German newspaper that was leaked the Panama Papers, which then shared the files with the Washington-based International Consortium of Investigative Journalists and its network of global media partners, including CBC/Radio-Canada.
The Panama Papers emerged a few months earlier in 2016, but the CRA has yet to lay any criminal charges against anyone named in that leak. Other countries have already brought hundreds of charges and secured convictions.
The CRA received nearly $1 billion in extra funding between 2016 and this year to combat tax evasion and tax avoidance. In an email to CBC, the agency couldn’t point to a single criminal conviction it’s obtained in the last 4½ years that had to do with offshore tax evasion.
The agency said last week that at one point, it had five open criminal investigations stemming from the Panama Papers, but it subsequently dropped three. The two remaining cases appear to be ongoing probes into $77 million in alleged withholding-tax evasion in Vancouver, and an investigation into an Alberta oilpatch financier.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
